Why greens love high fuel bills

Fuel Poverty Action (FPA) reacted angrily when the UK prime minister, David Cameron, said he would act to cut fuel bills. Why?

FPA campaigns against higher fuel bills that hurt the poor – or does it? Cameron said he would ‘cut the green crap’, meaning the ‘green levies’ that are added by law on fuel bills. Fuel Poverty Action, supposedly the friend of the poor, denounced the proposed cut.

FPA is organising protests against high prices in central London on 26 November, but its own policy seems to support higher prices. How did it tie itself in these knots? The answer is that FPA’s campaigners support the green levies on fuel bills.

Green levies on fuel bills were brought in by the New Labour government to finance the transition away from fossil fuels to renewable energy. They make up nine per cent of the cost of the average fuel bill, currently running at £1,300 a year.

It is easy to see how FPA and other defenders of the green levies have painted themselves into this corner. The levies are supposed to fund investment in wind power and other renewables, and also to pay for government schemes to insulate people’s houses so that they can cut their fuel use.

The problem is that both of these are long-term goals which – it is hoped – will cut the cost of fuel for households. But in the here and now they are adding to the cost of electricity bills. Green campaigners like FPA end up calling for higher fuel bills so we can have lower fuel bills. In 1947, the then president of France, Charles de Gaulle, said something similar: ‘We must all tighten our belts if the standard of living is to rise.’ A few days ago, the Guardian wrote about ‘green levies, which go towards… helping the poor cut their usage’.

Green campaigners have long known that there is a problem with their goal of reducing consumption, namely that it is unlikely to be popular with the vast majority of people, who are also consumers (it was a point that was hotly debated at the ‘climate camps’ – the annual green get-togethers – until they stopped in 2011). The point is sharply drawn in the green policy on fuel bills. Environmentalists want to see less fossil fuel burned, which means less electricity generated and higher prices. Moreover, environmentalists have long argued that prices are artificially low, and should include the cost of pollution.

The green levies on energy bills are based on those arguments. Higher fuel bills will cut consumption, and lead to smaller carbon emissions. To make their point, green protesters succeeded in blocking a proposed coal-fired power station at Kingsnorth in 2008, and won a moratorium on future coal-burning plants – and cutting back on electricity generation in turn leads to higher prices.

The problem for the greens, and for their Labour Party allies, is that higher prices are very unpopular. Green activists, grappling among themselves with the charge that they are responsible for higher prices, have tried to explain the problem away. No, they say, we are not responsible for higher prices. Our policies are going to make prices lower because of the money earmarked for insulation schemes and alternative energy sources. Such is the appeal of green groupthink.

This argument might be convincing in an entirely abstract world. But in Britain in 2013, it is just wrong. The reason is that even if these changes could happen, they cannot happen immediately, before a great deal of time and energy is spent making those changes.

Take alternative energy sources. The most important of these is wind power, which, it is claimed, provides around five per cent of the country’s energy (though these statistics are almost certainly an exaggeration of the extent of UK wind power). That would mean that to push up alternative energy’s share in electricity generation, wind power would have to double in capacity. Right now, wind power is causing problems across the country, and its finances are questioned. Clearly wind power is not going to be Britain’s main source of energy for generations.

Second, there is insulation. Better insulation does reduce energy consumption. So far, 1,000 of the 26million households in Britain have taken up the government’s insulation scheme (which is paid for out of the green levy). Two hundred and nineteen homes have been insulated. Like the subsidies to wind power, those to home insulation have been criticised for being unrealistically costly. In any event, it seems unlikely that the home insulation scheme is going to make much impact before Christmas. At the current rate of progress, it would take 5,000 years to insulate half of British homes.

Assuming that the shift to alternative energy and investment in home insulation are good ideas, why are they not financed out of general taxation? The answer is that these schemes were brought in with the specific intent of pushing energy prices up.

The green levies are not the only reason that prices have gone up. It is the failure to match energy demands with energy generation that is forcing the price up. The failure to build enough electricity-generation plants – like the one at Kingsnorth – means that the UK is forced to buy the shortfall on the open market. Campaigners think that they are hitting the energy suppliers with these actions, but E.ON and the others can just as easily make money selling less electricity at a higher price as they can selling more at a lower price; indeed, judging by their profits it is a very successful business model. Cutting back supply can only make things worse.

You can see greens’ problem. Rising energy prices are the only policy ever introduced with the intention of cutting CO2 emissions that has actually worked. (The replacement of coal-fired plants with gas – the so-called ‘dash for gas’ – achieved substantial cuts in the Nineties and Noughties, but CO2 emissions were not the reason for the policy.) Overpriced energy actually does make people cut back their use. Historically, this is a great challenge to environmentalists. Only once in most people’s lives does the chance come actually to make a difference. Here, for the first time, the greens have succeeded in reducing carbon emissions.

So why will they not defend the policy? Instead of targeting the Big Six energy producers for raising prices, green protesters should be applauding them, or perhaps demanding that the prices go up even more. To do so, of course, would mean coming clean about the meaning of environmentalism – that it means cutting back people’s consumption. That is something that the environmental campaigners are too cowardly to say.

FPA highlights the economic hardship that higher prices cause, and also points to the increase in winter fuel deaths that come when prices rise. But just as many of those problems can be laid at the door of the supporters of the green levies.

FPA will be campaigning against the Big Six energy producers tomorrow – but that is just a smokescreen. Their main demand is that energy prices should rise, so that we can use less.

James Heartfield is author most recently of The European Union and the End of Politics, published by ZER0 Books. Visit his website here.